Confidence lifts nine points, but households remain wary of spending
New Zealand consumer confidence rose sharply in the September quarter, according to the latest Westpac McDermott Miller survey, though households remain well below average levels of optimism and continue to hold back on spending.
Confidence lifts, but remains below average
The Consumer Confidence Index climbed 9.1 points to 89.5 in September, up from 80.4 in June, marking a sizeable recovery after confidence fell to a three-year low earlier in the year. A reading below 100 means pessimists still outnumber optimists nationwide, and the current level remains well short of the ten-year average of 97.2.
Westpac attributed the improvement partly to falling petrol prices, which have eased since their peak earlier this year, and continued strength in export industries supporting incomes in several regions. However, the outlook for fuel prices was already looking less favourable at the time of writing, and households aren't expecting conditions to improve much over 2027.
Households still under financial strain
Despite the pickup in sentiment, most households continue to report that their financial position has worsened over the past year, with the current financial situation measure sitting at -29.5, still well below its ten-year average of -14.8.
Rising living costs, a soft labour market, and higher mortgage rates continue to squeeze households, with the Reserve Bank lifting the official cash rate twice since July. The most recent of these came on 2 September, when the RBNZ lifted the OCR by 25 basis points to 2.75%, with the central bank citing the need to gradually remove monetary stimulus to bring inflation back to target.
That rate rise is already flowing through to borrowers. FMA data tracking how banks pass on OCR changes show floating mortgage rates rose between 0.25 and 0.35 percentage points in response, though existing customers waited anywhere from 8 to 36 days for the change to apply, depending on their bank.
Spending appetites remain subdued as a result. Most households told Westpac they've cut back on dining out and entertainment, and around 30% said in a separate July survey that they've adjusted spending on groceries, opting for fewer or cheaper items.
Regional divide persists
Confidence improved in nearly every region this quarter, consistent with lower fuel costs freeing up household budgets nationwide. Auckland recorded the highest regional reading at 94.3, while Taranaki/Manawatu-Whanganui was the exception, with confidence essentially unchanged and still the lowest in the country at 79.9. Regions with strong rural and export bases continued to outperform the major urban centres of Auckland and Wellington, with labour market conditions notably firmer in the lower South Island.
For mortgage advisers, the data points to a market where confidence is recovering but borrowing appetite and household spending capacity remain constrained by ongoing rate pressure.
To read the full Westpac McDermott survey report, click here.
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